Britain Says No To Euro

Jan 13, 2005

By Agence France-Presse Britain is not yet ready to join the euro, Britain's Chancellor of the Exchequer Gordon Brown announced on June 9, while holding out the possibility of a referendum on the issue in the next few years. Three of five economic tests on the potential impact of euro entry, imposed by Brown himself in 1997, had not been successfully met, he told parliament in a verdict that keeps Britain at arm's length from a rapidly integrating Europe. There was not yet sufficient convergence or sufficient flexibility between the economies of Britain and the euro zone, Brown said, meaning that a third test on future employment, stability and growth could thus also not be met. However in a clear concession to pro-euro forces within Brown's Labor Party -- including Prime Minister Tony Blair -- the chancellor took great pains to stress that he believed Britain would, and should, sign up in the future. "Our view that membership in a successful single currency would be of benefit to the British people as well as to Europe is strengthened by the results of our assessment," Brown said. Brown also announced that a draft bill would be published in autumn paving the way for a future referendum on ditching the pound in favor of the euro. Brown's verdict came as a shock to no one but nonetheless attracted criticism from both sides of the debate. The main Conservative opposition was predictably brutal, calling it a compromise designed to paper over divisions between Brown and his prime minister, and labeling the five tests a sham. "This whole exercise has been an exercise in deceit," opposition finance spokesman Michael Howard told parliament. Pro-European business groups also expressed disappointment, with Niall Fitzgerald, chairman of household-goods giant Unilever PLC, London, saying the government should "go further." "Every year the UK stays out, the greater the difficulties that will be faced in competing for investment across the EU and the more difficult it will be for the UK to remain competitive," Fitzgerald said. Perhaps wary of this reaction, the prime minister worked the phones in a series of calls to world leaders following the announcement to explain the verdict. Brown himself undertook something of a sales pitch on the benefits which closer integration in Europe would bring the country. Joining the euro would save around a billion pounds (US$1.6 billion) a year in lower transaction costs to businesses and consumers as exchange rates disappeared, Brown said. Additionally, signing up would greatly boost British trade with the euro area, "perhaps to the extent of 50% over 30 years." And while major problems remained in achieving both convergence and sufficient flexibility, two tests were deemed passed, covering the effect on investment in Britain and the impact on the nation's highly lucrative financial services industries. Copyright Agence France-Presse, 2003